A little more than a month ago, the state house passed a bill seeking to undermine the Affordable Care Act. This bill is now on the state senate’s agenda for this week. Although there are many concerning provisions in this bill, the most troubling is a proposal to refund any taxpayer required to pay a tax penalty under the Affordable Care Act for failing to carry insurance. What the federal government taketh, under this provision, the state of South Carolina giveth back.
The problem with this provision is that it effectively disarms Obamacare’s mechanism for ensuring that everyone gets to participate in the health insurance market without anyone imposing crippling costs on that same market. Currently, providers of individual insurance simply refuse to cover people with expensive preexisting conditions. This prevents a person from refusing to buy insurance until they incur substantial health costs, and then trying to get an insurance pool that they haven’t paid into to cover their expenses. If everyone were allowed to do this, it would potentially collapse the entire health insurance market by draining all the money out of the insurance system.
The Affordable Care Act uses a three-part process to enable people with preexisting conditions to still obtain insurance. First, it bans the insurance industry’s practice of excluding people with preexisting conditions. Second, it requires most people to buy insurance before they get sick and imposes a tax penalty on those who don’t. Finally, it provides subsidies so that people who cannot afford insurance get assistance to enable them to do so.
The South Carolina bill, however would remove the second piece of this process by taking away South Carolinian’s financial incentive to buy insurance before they get sick. The result, if this provision takes effect, would be catastrophic for everyone currently in the individual health insurance market. Beginning in the 1990s, seven different states passed laws requiring insurers to cover all comers without also passing an Obamacare-style mandate. It ended in disaster every time. Some people saw their premiums rise 350 percent. Others lost access to individual insurance plans entirely.
Should the South Carolina bill become law, it is likely the courts will strike it down under a constitutional doctrine prohibiting state laws that “stand . . . as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Given the current, conservative and highly partisan state of the judiciary, however, there’s no guarantee that judges will follow this longstanding doctrine.
South Carolina’s senate is scheduled to adjourn Thursday at 5pm. Between now and then, it will decide whether to potentially rip health care away from thousands of people.